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’aVa 1 . A 















The Railways and the 
Government 


ADDRESS BY 
HOWARD ELLIOTT 

A 

At the Annual Dinner of the 
Railway Business Association 


December 11, 1913 


V 










REQUESTS FOR COPIES 
of this pamphlet will be welcome from all 
those desiring to "place it in the hands of 
their representatives or friends. Copies fur¬ 
nished or sent direct to lists upon application 
to Frank W. Noxon, Sec’y, Railway Business 
Association, 30 Church Street, New York. 



Form B 


2 






The Railways and the Government 

Address by 
Howard Elliott 

Chairman of the New England Lines 


Delivered at the Fifth Annual Dinner of the Railway Business 
Association, the national association of manufacturers of 
railway materials, equipment and supplies, at the Waldorf- 
Astoria Hotel, New York, December 11, 1913 


This is a gathering of representative 
men who contribute much to the in¬ 
dustrial activity and prosperity of the 
nation. The opportunity of speaking 
to you was accepted with hesitation, 
and only because it gives me a chance 
to meet many old friends and make, I 
hope, some new ones, and also because 
gatherings like this help us to appre¬ 
ciate our mutual interests. It is well 
to talk over those problems which the 
remarkable social and industrial evo¬ 
lution of the nation has placed upon 
the business men, who are anxious 
that this country shall progress, and 
who believe that the social and intel¬ 
lectual advancement of the people de¬ 
pends upon reasonable success in all 
forms of industry—a class of men 
also who are as high-minded and 
patriotic, and as great believers in the 
United States and its future as any 
class of men in the country. 

INDUSTRIAL INTERDEPENDENCE 

The rapid increase in the country’s 
population, accompanied, as it has 
been, by a racial mingling unprece¬ 
dented in history, has produced new 
economic conditions and has brought 


to the fore new problems and new 
theories of the relation of the govern¬ 
ment and the citizen in his business. 
The application of the principle of 
increasing government supervision of 
business emphasized more than ever 
before the interdependence of all 
industry. 

The industries which you and I 
represent are very closely related. 
Lack of sustenance and stagnation in 
one affects the others. If the railways 
of this country are to be maintained 
and operated as they should be, in¬ 
creasing their facilities to meet the 
increased demand of the growing 
business of the nation, then they must 
be supplied with materials, and this 
benefits the many industries which 
you represent. These purchases of 
the railway stimulate the activities 
of the whole country (applause). On 
the other hand, any curtailment in the 
purchasing power of the railway will 
have a withering effect on many in¬ 
dustries and retard the prosperity of 
some which have been leading factors 
in the commercial growth and expan¬ 
sion of the nation. 


3 


RAILWAY GROWTH 

The growth of the railways in the 
United States is without a parallel in 
any other nation. In their present 
form these railways have been con¬ 
structed practically within the last 
fifty years. The total operating rev¬ 
enues of railways earning $1,000,000 
or more for the fiscal year ending June 
30th, 1913, were $3,057,089,811, of 
which $2,134,563,789 came from 
transportation of freight and $678,- 
440,089 from carrying passengers. In 
the same year these railways paid out 
for expenses $2,118,529,173, of which 
$407,156,008 was for maintenance of 
way and structures, $501,663,582 for 
maintenance of equipment, $1,074,- 
914,428 for the actual expenses of 
transportation, and $ 134795,155 for 
administration and traffic expenses. 
The net operating revenues of the rail¬ 
ways of the country in the last fiscal 
year amounted to $938,560,638, out of 
which was paid in taxes $123,682,118. 

The railways east of the Mississippi, 
and north of the Ohio and Potomac 
Rivers in the same year did a business 
of $1,386,073,429, of which $992,- 
403,39 0 was from freight, and $293,- 
234,927 from passengers carried. For 
the three items which make up be¬ 
tween 90 and 95% of the expense of 
operation, maintenance of equipment, 
maintenance of roadbed, bridges, etc., 
and transportation, these roads spent 
in 1913 $246,727,105 for maintenance 
of equipment; $180,273,335 for main¬ 
tenance of tracks, bridges, etc., and 
$502,734,000 for transportation. 


THE RAILWAY PAYROLL 

Everyone admits now that the 
transportation question in this country 
is a very vital one, and these few 
figures are given to emphasize its im¬ 
portance. And the importance to the 
general welfare is not alone in the 
service rendered by transporting man 
and his property, but also because the 


railway is a great paymaster. The 
railway payroll is one of the greatest 
payrolls in the country; more than 
1,700,000 employees, receiving in 
wages and salaries last year nearly 
$1,250,000,000. Adding the families 
of those employees, there are nearly 
7,000.000 people, about 7^% 
total population, supported by this 
payroll. Think of what this means 
to the communities in which these 
railway employees live, to the trades¬ 
men to whom their earnings go for 
food and clothing! Think of the effect 
upon the business interests of this 
country generally of the distribution 
of this sum of money, passing through 
the hands of this multitude of pur¬ 
chasers into the channels of trade. 
It would be difficult to find a person 
in this country who is not, in one way 
or another, benefited by this employ¬ 
ment of labor. The railway employee 
is an important factor in his com¬ 
munity, and there is no better proof 
of the theory that the prosperity of 
a railroad and the section it covers 
are interdependent than that fur¬ 
nished by the part the railway em¬ 
ployees’ purchases play in helping 
business. 

Out of $2,750,667,435 which the 
railways earned in 1910, $1,143,725,- 
306, or 41.58% were distributed in 
wages and salaries; in 1911, out of 
$2,789,761,669, $1,208,466,470, or 

43.32%, and in 1912, out of $2,826,- 
917,967, $1,243,113,172, or 43-97%. 
And each year this wage distribution 
has been taking a larger proportion 
of the railway dollar. Between 1910 
and 1911 there was an increase of 
5.66% in the payroll and only 1.42% 
in the operating revenues. Between 
1911 and 1912, the increase in the 
payroll was 2.87%, and in operating 
revenues 1.33%. There are no very 
complete statistics of the amount of 
material purchased by the railways, 
but it is very large, many hundreds 
of millions of dollars. 


4 


Obviously, as an abstract proposi¬ 
tion, because of its effect on general 
business activities and upon the wel¬ 
fare and happiness of so many people, 
everybody must want this great pay¬ 
roll maintained, and want the rail¬ 
ways to go on spending money. Cur¬ 
tailment of the railway purchasing 
power, or a diminution of its payroll, 
would be felt in millions of homes. 
A continued improvement of the rail¬ 
way will stimulate trade, give a gen¬ 
eral steadiness to business, and 
minimize depression. The money the 
railways would spend in expanding 
their facilities as they should be ex¬ 
panded, to keep pace with the growth 
Of business in the country, would 
percolate into every conceivable artery 
of trade. Can it be doubted that this 
would impart that wholesome stimulus 
to business that is so anxiously 
awaited at the present time? 

To a large extent the railway is 
simply a collecting and distributing 
agency of the sums, small in units but 
large in the aggregate, that the public 
pays for the service it performs. The 
railway owner retains for himself 
what, compared with many forms of 
other business, is a relatively small re¬ 
turn on the value of the railway plant. 
If there is to be a halt in railway ac¬ 
tivity, if the railways of the country 
are to be forced, by the conditions im¬ 
posed upon them, to abandon all new 
construction and restrict their outlay 
to the absolute necessities of mainte¬ 
nance and operation, what will be the 
result ? Will there not follow a corre¬ 
sponding contraction, especially in 
those industries, many of them very 
large, which the railroad helps to sup¬ 
port, and be imparted by them, in turn, 
through still other trade channels until 
an adverse influence is felt throughout 
the entire business life of the country. 
For example: The railways purchase 
a very large proportion of all the iron 
and steel made in this country. Thus 
their prosperity is very closely inter¬ 
woven with the prosperity of the 


great metal industry of the country, 
and upon this industry enforced econ¬ 
omies and the suspension of con¬ 
struction by the railways will have a 
most serious effect. 

RAILWAY EARNINGS 

There is indisputable evidence that 
that expansion of our railways which 
has contributed so much to the coun¬ 
try’s prosperity has, by reason of the 
conditions now imposed upon them, 
reached a point of practical suspen¬ 
sion. There is hardly any new con¬ 
struction being undertaken, and im¬ 
provements are being postponed 
wherever practicable, because of lack 
of funds. This is due, in part, to the 
great increase in the cost of labor and 
materials, in part to the elaborate and 
luxurious facilities which the people 
demand, and in part to the rise in the 
rates of interest, all of which is re¬ 
flected in the loss in net earnings 
shown by recent statements of the 
railways; and this despite an increase 
in gross earnings maintained until 
very recently, though there are signs 
today of a falling off even in gross. 
In the case of the Eastern roads, the 
gross earnings increased $187,000,000 
from 1910 to 1913, while operating 
expenses and taxes increased $201,- 
000,000, the increase in tax payments 
alone amounting, in those three years, 
to $11,590,000. There was an actual 
decrease in the net operating income 
of these roads of $16,311,000. In 
1913, these railways earned in gross 
$1,424,000,000. Their net operating 
income was $336,754,000, and after 
payment of interest on funded debt 
and other obligatory charges, there 
was left $206,600,000. The dividends 
paid out of this amounted to $130,- 
000,000, which was 5.10% on the 
capital stock outstanding. This was 
$19,000,000 less than the dividends 
paid in 1912 and $7,000,000 less than 
the dividends paid in 1910. 

In the Central Freight Association 
territory, a group of twenty-eight 


5 


roads, having 23,167 miles of road, or 
51.5% of the entire mileage in the 
territory, roads like the Big Four, 
Vandalia, Wabash, Chicago and 
Alton, and Illinois Central, in the 
year ending June 30, 1913, earned 
$63,000,000 more than in the panic 
year of 1908, but their operating ex¬ 
penses and taxes were $62,000,000 
more, and after paying expenses and 
taxes, their net operating revenues 
were only $811,000 more than in 1908, 
and their net corporate income was 
actually $8,000,000 less, although in 
these five years $180,000,000 of new 
capital had been invested in these 
properties. 

The reduction in net is shown very 
strikingly in the statements of the 
New York Central, the Pennsylvania, 
and the New Haven for the first four 
months of the present fiscal year. In 
this period, the New York Central 
Lines showed an increase in gross 
earnings of $4,339,442, as compared 
with the same period of 1912, but as a 
result of increased expenses there was 
a decrease in the net earnings of 
$7,614,542. The Pennsylvania, for 
the same period, showed an increase 
in gross earnings of $5,100,192, but 
a decrease in net earnings of $4,367,- 
795, while the New Haven, including 
all transpor tation lines in which it is 
interested, showed a decrease of 
$79°>379- 12 i n the gross, and $4,020,- 
311.51 in net operating revenue, and 
of $4,934,725.01 in net corporate in¬ 
come, after allowing for all fixed 
charges of every kind. 

THE RAILWAY PROBLEM 

I think that all candid and thought¬ 
ful persons will admit that the situa¬ 
tion as reflected here is a serious one, 
not only as affecting the railways 
themselves, but the entire business of 
this country. Indeed, with railway 
credit impaired, it would seem difficult 
for the railways to extricate them¬ 
selves from the present situation unless 
a change occurs in public sentiment 


and in the treatment they receive 
from the people, as expressed through 
their various governmental agencies. 
Undoubtedly, various causes have 
contributed to bring this situation 
'about. Some of these have been 
economic and some social, and the 
railway has suffered from both, per¬ 
haps, more than any other industry 
in that the price of its service is no 
longer within its own control, and 
the same may be said of its great 
payroll. 

Is it -not incumbent upon all 
thoughtful men who wish to see this 
country continue to prosper to stop 
and ask themselves what can be done 
in this emergency? Is this trouble 
a socialistic one, due to new currents 
of thought and feeling in the minds of 
a majority of our citizens, fostered 
possibly by ideas of government 
brought here by many of our new 
citizens from the Old World, who 
influence many others with whom 
they come in contact? And if the 
trouble is socialistic, does it not be¬ 
hoove every citizen who does not 
believe in this kind of doctrine ap¬ 
plied to business to speak out? 

PRESENT TENDENCIES 

Many of us have hazy ideas about 
socialism, but the principle under¬ 
lying the proposed socialistic state, 
as expressed by many socialists, is 
that from every one shall be expected 
according to his ability, and that to 
every one shall be given in accord¬ 
ance with his needs. The socialistic 
ideal thus expressed, is that every 
man shall do his utmost, but that he 
is not to be paid in proportion to the 
amount of work that he does, or in 
proportion to its value, but, on the 
contrary, he is to be paid in accord¬ 
ance with his needs. The tendency 
of the people of the United States, 
however, seems to be not to extend 
to the railways even that treatment 
which is expressed by this socialistic 
ideal (applause). Under that ideal, 


6 


the railways would be expected to do 
all that they can, and would be al¬ 
lowed to receive all that they need, 
but is it not true today that the rail¬ 
ways are expected to do more than 
they can, and, at the same time, are 
not permitted to receive what they 
need? 

THE HUMAN FACTOR 

For example, first and foremost, the 
railways are expected to run their 
trains without causing injuries or 
deaths that would be avoidable by all 
ordinary human precaution. Yet dis¬ 
tinction is seldom made between the 
need for care and caution on the part 
of the public and the need for care 
and caution on the part of those en¬ 
trusted with railway operation (ap¬ 
plause). A very large number of 
the injuries and half the deaths 
charged against the railways are of 
trespassers on railway property. If 
people will not keep off railway prop¬ 
erty the law should compel them to 
do so (applause). Yet, although the 
railway companies have time and 
again urged legislatures to pass laws 
against trespassing, only two or 
three state legislatures have re¬ 
sponded. In other words, more is 
expected of the railways in diminish¬ 
ing the number of casualties and fa¬ 
talities than they can do, and there is 
not given them that protection which 
they need and which the people need 
(applause). Wrecks) and accidents 
are sometimes due to the delinquency 
of those charged with the management 
and operation of a railway, and it is 
only right that the managing officers 
of a railway should be held directly 
to account for defects in administra¬ 
tion and carelessness in directing 
operation. But there is another side, 
and if the officers are to be held 
responsible for the administration and 
discipline the employees of a railway 
should be held responsible for sub¬ 
mission to proper discipline and 
should not consider their allegiance to 


their brotherhoods above their allegi¬ 
ance to the company which employs 
them (great applause), or their duty 
to the public who supply the money 
for their wages. The Interstate Com¬ 
merce Commission has pointed out 
that one of the most disturbing causes 
of accidents is the carelessness of the 
railway employees. Under these con¬ 
ditions, quite generally acquiesced in 
by the public and the press, the people 
make it difficult for the railway 
managers to preserve the discipline 
that the hazardous business of train 
operation demands, and are asking 
almost more than the railways can 
do (applause). If the railways are 
quasi-public servants, their employees 
are also quasi-public servants, and the 
people should hold the man as well as 
the master to his responsibility (ap¬ 
plause). By not demanding this 
responsibility, the people are not ac¬ 
cording to the railways that which 
they need and that which the people 
need. 

IMPROVEMENTS 

While the railways should be held 
directly to account for maintaining 
roadbed, track, and other facilities in 
proper condition, the fact should not 
be lost sight of that safety in opera¬ 
tion, as the people look upon it to¬ 
day, means equipment of steel or 
steel underframe in the passenger 
service, and other heavy expenditures 
in consequence. To demand that such 
improvements be made within any 
short period of time, in advance of 
the ability of the railways to pay for 
them, is to demand of the railways 
more than they can accomplish. And 
to hold them down, and so to impair 
their credit that they cannot obtain 
funds for such improvements is cer¬ 
tainly not to accord to them that which 
they need (applause). Again, in 
insisting that they serve the end of 
efficiency from the standpoint of eco¬ 
nomical operation, and, at the same 


7 


time, meet the requirements for fast 
and frequent service, the people de¬ 
mand of the railways more than they 
can do. If they desire such service 
without allowing the railways the 
compensation that justifies it, they are 
not according the railways what they 
need. 

In this respect, the railways of 
Europe are treated better than ours, 
because there the justice of charging 
a higher rate for a fast freight service 
has been recognized. In Europe, as 
in this country, there are generally 
three kinds of service, express freight 
on passenger trains, expedited or fast 
freight, and ordinary, or low-speed 
freight. But, while in this country no 
distinction is made between the fast 
and slow freight in the matter of 
compensation, in Europe a higher 
rate is permitted in the case of “ac¬ 
celerated freight.” Such a charge, 
if permitted here, would increase 
earnings and help the railroads to 
make improvements now badly 
needed and yet would not impose an 
undue burden upon the public (ap¬ 
plause). 

COMPETITION VERSUS 
COMBINATION 

There is another respect in which 
the people of this country are deal¬ 
ing at cross purposes with the rail¬ 
ways, and this is a question of 
transcendent importance, not only in 
the field of transportation, but 
throughout industry and commerce. 
This is a question of competition 
versus combination. The New Haven 
road is a consolidation of 189 com¬ 
panies—the Boston and Maine and 
Maine Central of 200 companies. 
Before the consolidation of these lines, 
when it was desired to move a car¬ 
load of freight from one end of New 
England to another, separate ar¬ 
rangements had to be made and vary¬ 
ing instructions issued for each rail¬ 
way and endless bargaining and 


higgling over rates and schedules, as 
well as the expense of many separate 
organizations. In this combination of 
separate railways in one organic 
whole, there is the possibility of effi¬ 
ciency, under proper management, 
both from the standpoint of economi¬ 
cal operation of the railways and from 
the public’s standpoint of improved 
service. Because of practices incident 
to the great construction period of 
American development and not con¬ 
fined to railways, the people created 
the Interstate Commerce Commission, 
which has pretty effectually not only 
restrained competition, but stifled it 
so far as rates are concerned. As the 
Commission has the power to prevent 
the railroads from charging unreason¬ 
able rates and to prevent unjust dis¬ 
crimination, it is a grave question 
whether it is not an economical error 
to object to combinations of railways 
which, under suitable management, 
can be made to serve the ends of effi¬ 
ciency by more economical operation 
and better service (applause). Here 
again we find an inconsistency on the 
part of the people, who insist that 
the railways shall practise the greatest 
economy and efficiency in operation, 
but who, at the same time, object to 
principles that will further such 
economy. If the railways are not 
supported by the people they cannot 
render service to the people. The 
very expression “The Railroads and 
the People” indicates a distinction, a 
separation of interests, that the pros¬ 
perity or the adversity of the rail¬ 
ways is a matter of indifference to the 
people, and vice versa. Such a feel¬ 
ing occasionally finds expression in 
such an utterance as was made re¬ 
cently in the New Orleans Picayune, 
which editorially called upon the 
voters to oppose any candidate who 
was not “fully competent and willing 
to place the peoples’ interests above 
those of the railroads and trans¬ 
portation lines under all circum¬ 
stances,” when, as a matter of fact, 


8 


their interests are identical. One 
reason, I believe, for this attitude, is 
that our people do not realize that 
railroading is business just as much 
as rail making or producing paint is 
business, and that railways are as 
much a part of every-day life as any 
other business. 

MULTIPLICITY OF LAWS 

There are state legislatures which 
pass laws concerning the railways 
within their state and the laws of one 
state sometimes conflict with those of 
another, and sometimes with those of 
the national government. The effect 
of this multiform and heterogeneous 
regulation is to compel the railroads 
to serve forty-nine masters, although 
the impossibility of serving even two 
masters has been crystalized in a 
proverb (applause). The effect of 
this multiplicity of laws also has been 
to undermine the confidence of in¬ 
vestors, whose money is needed for 
the extension and the improvement of 
the railroads. It has been estimated 
that nearly one billion dollars will be 
required within the next year to im¬ 
prove the railways so that they may 
meet the demands of growing business 
and safer and more luxurious service. 
How can this money be raised ? How 
can this condition be remedied ? Must 
it not come from co-operation of the 
people with the railways and from the 
conviction in the public mind that rail¬ 
ways are rendering to the people not 
only an essential but a vital service? 

GOVERNMENTAL EFFICIENCY 

If the people, by reason of new ten¬ 
dencies of thought, are exacting more 
of the railways and allowing them less 
in return for service rendered, are the 
people following the same rule with 
respect to the great machine of gov¬ 
ernment which they themselves have 
created, and in whose management 
they have a potent voice? There has 
been criticism of lack of efficiency in 
railway administration, and some of 


it is just, because railway officers and 
men are human and imperfect, but as 
a class they are doing better year by 
year. As a class they are high- 
minded, patriotic gentlemen, dealing 
with a problem that at times is very 
discouraging. They believe in frank 
and honorable business methods. 
They are doing the very best they can 
and they should receive help and com¬ 
mendation from the public instead of 
hindrance and hostile criticism (great 
applause). Does the Government set 
any better example to the business 
men or to the youth of this country 
of the necessity of hard, efficient and 
high-minded work? (applause). In 
1896 there were in the Executive Civil 
Service, excluding employees in the 
Congress, the Judiciary and enlisted 
men and officers of the Army and 
Navy, 178,717 persons, and in 1910, 
355,635, an increase of 100 per cent, 
in 14 years. While the population of 
the country has increased, it has not 
increased 100 per cent., and is the 
Government doing the careful, efficient 
work the taxpayer has a right to de¬ 
mand? (great applause.) If the Gov¬ 
ernment, with all its power, has been 
unable to resist the demands for 
greater elaborateness and more em¬ 
ployees, can it be expected that the 
railways can escape these same forces ? 
(Applause, and cries of “No, no.”) 
Again, does the Government exem¬ 
plify in its own dealings with others 
the principles of justice and business 
morality which the people, through 
this same agency, exact from those 
subservient to it? 

STANDARDS OF CONDUCT 

There has been a gradual and de¬ 
sirable change in the standards of 
business in the past twenty years, and 
particularly in the past ten. Prac¬ 
tices that a few years ago were con¬ 
sidered proper in financial, commer¬ 
cial, manufacturing, and transporta¬ 
tion business are contrary to the 
ideas of the public today. 


9 


In this business uplift, I think the 
great railway systems of the country, 
taken as a whole, are in the front 
rank in trying to do their work on a 
high plane and in trying to observe 
the complicated laws of the land 
(applause). And the larger and more 
complicated the business, the more 
rigid is the carrying out of the maxim 
that “Honesty is the best policy” 
(applause). 

Some people are still ready to ask 
for the rebate, the pass, and the 
special privilege. Because of some 
glaring failures here and there the 
press and the public sometimes are too 
prone to condemn all. But every man 
in modern industrial business life 
knows how insistent the majority of 
men charged with the responsibility 
of management is for honesty, good 
morals, industry, and avoidance of 
sharp practice, and of trying to get 
something for nothing (applause). 

The moral effect of this policy on 
the young man in business must be 
good, because whether he likes it or 
not, he must behave or be thrown into 
the discard. What kind of an exam¬ 
ple does the United States Govern¬ 
ment set before the youth of the land 
in its treatment of the great trans¬ 
portation lines ? The Government 
should surely be as scrupulously hon¬ 
est and high-minded in dealing with 
the railways as it expects the railways 
to be in dealing with the people, but is 
it? (Applause.) 

RAILWAY MAIL PAY 

Look at the mail and parcels post 
situation for a moment. The Gov¬ 
ernment pays the railways for trans¬ 
porting the mail on the basis of 
weights obtained in the autumn of 
1912 for four years beginning July 1, 
1913, although there is always some 
increase in weight each year. In Jan¬ 
uary, 1913, the Parcels Post began 
with a weight limit of n pounds, 
then increased it to 20, and it is now, 
in some cases, to be 50 pounds. The 


Parcels Post takes business away 
from the express business of the rail¬ 
way and reduces earnings in that way, 
but the Government pays nothing for 
the extra weight carried, as the test 
weighing was before the Parcels Post 
began. So for four years the railways 
must carry the increasing weight of 
the ordinary mail and the rapidly 
growing Parcels Post freight for 
nothing, unless the Government takes 
steps to pay for service already per¬ 
formed and to be performed, which, 
so far, it seems disinclined to do 
(applause). 

On the New Haven Road, which 
right now needs all the help it can 
get (laughter and applause), a care¬ 
ful computation made by chartered 
accountants showed that the company 
was performing service costing 
$743,000 a year more than it received; 
and what is true of the New Haven 
is true of many other roads. Yet 
there is little criticism of the action of 
the Government, although it is taking 
large sums of money away from the 
railroads (applause). Do you re¬ 
member all the outcry there was, and 
justly so, when it was found some 
years ago that an importer in Brook¬ 
lyn was defrauding the Government 
through false weights? (Laughter 
and applause.) 

The New York Times, in an edi¬ 
torial in October, 1913, said: 

“Every receiver of a postal parcel 
carried at the cost of the railways 
whose services are not paid for is a 
receiver of stolen goods.” (Laughter 
and applause.) 

The Chicago Inter-Ocean , in com¬ 
menting on this, said: 

“Any man who, merely because he 
has the power, compels another to 
give him unpaid service, is a robber 
(great applause). He has taken 
from the other his time, his strength, 
or his property in some form, without 
making due compensation. If ten 
men thus combine to rob eight, the im¬ 
morality remains. Because several 


10 


millions have combined ‘through Gov¬ 
ernment’ thus to rob their fellow citi¬ 
zens who happen to own railroads, 
the wrong of it is not made right.” 

SERVICE WITHOUT PAY 

This is strong language, but is it not 
true? 

Here are the railways, struggling to 
make both ends meet, and the Gov¬ 
ernment takes service from them 
worth, exclusive of the parcels post, 
at least $15,000,000 per year, and no 
pay. What kind of an example is this 
for the great United States Govern¬ 
ment to set to the younger men of 
the country? (Laughter and ap¬ 
plause.) 

The whole theory of modern rail¬ 
way regulation is to secure honesty 
of operation and fairness of treat¬ 
ment on the part of the railway 
toward all classes of the public. Does 
it not, therefore, behoove the Govern¬ 
ment in all of its relations with the 
transportation companies, to treat 
them with most scrupulous regard to 
the dictates of honesty and fairness? 
Treatment by the Government, how¬ 
ever, of the question of compensating 
the railways for carrying the people’s 
mails suggests a lack of full apprecia¬ 
tion of this converse proposition by 
some of our highest governmental 
authorities. While not a single defi¬ 
nite and practical step has been taken 
with a view of compensating the rail¬ 
ways for carrying the additional 
weight of the mail for the period of 
the first six months of the parcels 
post, the Postmaster General was em¬ 
powered, after July first, to add not 
exceeding five per cent, to the pay of 
the railways. But on August 15th, 
the Postmaster General increased the 
weight limit from eleven to twenty 
pounds, and the Interstate Commerce 
Commision, only last week, gave its 
approval to his recommendation of a 
further increase to 50 pounds. No 
arrangements were made, however, 


and no arrangements have as yet been 
made, to compensate the roads for this 
additional weight. Is it any wonder 
that the Parcels Post, under such con¬ 
ditions, has been eminently success¬ 
ful? (Laughter and applause.) And 
is it any wonder that some advocates 
of Government ownership have seized 
upon its success as an argument for 
other theories, particularly with re¬ 
spect to its efficiency and economy? 
(Laughter and applause.) 

The Supreme Court has ruled that 
the railways are not compelled to 
carry the mails, but that if they do 
carry them it must be under the rules 
laid down by the Postmaster General. 
Any thinking man will realize that 
they could not seriously consider re¬ 
fusing to carry the mails. If the law 
compelled them to carry the mails 
under rates fixed by Congress which 
were not compensatory, they would 
have some standing before the courts, 
but under the law as it stands they 
must make now a contract with the 
Post Office Department upon terms 
dictated by that Department, and can 
only appeal to Public Opinion for a 
redress. 

THE RAILWAY FACTOR 

The more men of fair and unbiased 
minds study the economic situation in 
this country, affected as it un¬ 
doubtedly is, by some of these experi¬ 
ments of Government, the more are 
they impressed with the importance 
of the railway situation as a factor. 
Sir George Paish, eminent in the field 
of finance and economics, commenting 
on the country’s condition, after a long 
trip of observation, said recently: 

“In considering the economic out¬ 
look of the United States in the im¬ 
mediate future, it is evident that the 
factor of most immediate importance 
is the application of the railways of 
the Eastern States to the Interstate 
Commerce Commission for an ad¬ 
vance in rates. The difficulty experi- 


11 


enced by the railways in raising capi¬ 
tal has already caused many of them 
to reduce their new capital expendi¬ 
tures, and this reduction in a large 
measure accounts for the reaction in 
the iron and equipment trades that is 
now observable. If the difficulties of 
raising new capital become still 
greater, then it is obvious that the 
railway companies would practically 
stop improvement works and a se¬ 
rious setback in trade would result. 
If, however, the railways succeed in 
funding the large amount of notes 
which fall due in the current year, 
and in raising the new capital they re¬ 
quire to expend on works of improve¬ 
ment and on new equipment, then the 
reaction in trade, due to international 
conditions and other influences would, 
in my judgment, be comparatively 
small. Thus the action of the Inter¬ 
state Commerce Commission in alter¬ 
ing or disallowing the railways of the 
East to advance their rates by five 
per cent, will have important econo¬ 
mic consequences.” 

RAILWAY IMPROVEMENT 
NECESSARY 

With all our troubles, however, I 
still feel that we will come out all 
right, but—and this a great big but — 
care must be taken in working out 
these problems, and the public must 
be told the truth, or harm will be done 
that will take years to cure, and the 
best results will be delayed. It is 
foolish, in this country, to admit that 
all railway improvement must be given 
up ; These things must go on; public 
opinion will not tolerate a deteriora¬ 
tion of the railways. It will insist 
upon their being able to furnish the 
service required by growing business 
and by the very logic of the situation 
the public will provide the means for 
them so to do. But it is most im¬ 
portant not to delay too long. 


HOPEFUL SIGNS 

There are some rifts in the clouds. 
Signs indeed are multiplying of a re¬ 
adjustment of ideas in the public 
mind, which ought to find a reflection 
in the attitude of governmental agen¬ 
cies. The miasma which has arisen 
from the misrepresentation of the past 
is disappearing, and the public mind is 
clearing in consequence. That a con¬ 
structive rather than a destructive 
sentiment is growing is apparent. 
This drift in public sentiment is 
clearly beginning to make itself felt, 
as shown in some recent expressions 
of a friendly nature coming from 
those in Government offices. Such, 
for example, was the statement made 
only a short time before his death by 
Interstate Commerce Commissioner 
Marble: “We are seeking to bring 
about a condition that will be fair 
and equitable and that will make the 
railroads successful under present 
ownership. ,, (Applause.) In the 
newspapers this drift is finding ex¬ 
pression in a rebuke of continued criti¬ 
cism and intemperate denunciation of 
former practices, and a general reali¬ 
zation that such a course can only 
produce widespread business atrophy. 

CURING THE PATIENT 

National need of terminal and other 
railway facilities having been thor¬ 
oughly impressed upon the public 
mind, shippers and editors generally 
convinced that larger net railway re¬ 
turns should be permitted, what are 
the reasons and perplexities which 
prevent the people from giving effect 
to a policy that will cure the trouble, 
making it unanimous? Even if there 
is only a vigorous minority opposed to 
such policy, candid consideration of 
their objections is due them. 

It is claimed that the management 
of some roads has not been honest— 
that insiders have profited when they 
should not. The morals cf all kinds 
of business have improved year by 


12 


year, and things have been done in 
railway and other business in the de¬ 
velopment of the country that were 
probably not right then and that cer¬ 
tainly are frowned upon now by law 
and public opinion. Such things 
ought never to have been done. 
Owners of railways should root out 
dishonesty if it exists, and if they will 
not, public authority will do it. But 
is there anything in the situation that 
warrants calling a halt on the develop¬ 
ment of the continent? (Applause.) 
Every time a clergyman, a doctor, a 
senator, or a cashier is punished, are 
we forthwith to abolish all clergymen, 
all doctors, all senators, and all cash¬ 
iers, while we unfrock that particular 
clergyman, convict that particular 
doctor, expel that particular senator, 
or jail that particular cashier? 

RAILWAY SECURITIES 

Others say that some railways are 
over-capitalized. Whether they are or 
not, and certainly American roads 
have led the world in refraining from 
it, no more capitalization ought to be 
created than is necessary in order to 
serve the public. If too much was 
issued by some roads in the past, this 
is to be regretted, but no workable 
method has been suggested by which 
securities issued legally and bought in 
good faith can be taken from their 
owners without failures and receiver¬ 
ships that harm many more people 
than the owners of the securities. 
(Applause.) As for the future, every 
railway of importance runs through 
one or more states which regulate 
security issues. And apart from that, 
those responsible for railway manage¬ 
ment realize, as they never did before, 
the absolute necessity of sound busi¬ 
ness principles in issuing securities, 
law or no law. The present problem 
is not to restrict the issues of securi¬ 
ties but to find people willing to buy 
them. (Laughter and applause.) 

Another says that if securities were 
sold over the counter the bankers’ 


commission would be saved. Perhaps, 
some day, if confidence can be re¬ 
stored, part of such commissions 
might be saved, but a railroad must 
have financial experts, as well as en¬ 
gineering experts, and pay a fair price 
for services rendered. If the commis¬ 
sions can be saved, they ought to be. 
But not even city, state and federal 
governments, whose credit is based on 
the taxing power, have been able at all 
times to float even moderately large 
popular loans without the aid of 
bankers. (Applause.) 

Others object because they say the 
new revenue would go to increased 
dividends. So some of it would and 
must. The dividend which a stock¬ 
holder receives is not all that he would 
like or that his managers want to pay, 
but is an amount needed to induce him 
and others to buy more stock or bonds 
when an enlarged plant is necessary 
in order to meet the desires and abso¬ 
lute necessities of the public. 

EFFECT OF ECONOMIES 

It is said that the increased income 
needed could be had by economies. It 
is true that economies have been in¬ 
troduced, and there is room for more 
of them. Railroad managers, as a 
whole, are pushing hard every day to 
improve men, methods, and facilities. 
Many economies, however, can only 
be adopted by throwing away old 
appliances and buying new ones, 
which is the case in mills and fac¬ 
tories as well as in railroads. And if 
the railroads have no money with 
which to get the new tools, they must 
do the best they can with the old ones. 
No effort in this direction should be 
neglected, and no other industry is, or 
in the nature of things can be, so 
thoroughly organized nation-wide as 
the railways to co-operate in studying, 
experimenting, and standardizing their 
progress. But, in view of the won¬ 
derful savings already accomplished, 
both major and minor, in the past few 


13 


years, and in spite of the larger 
percentages of gross earnings ab¬ 
sorbed by expenses and taxes, it is 
doubtful if the people should depend 
on such measures to offset the ap¬ 
parently irresistible rise in wages and 
in the price of materials, the higher 
cost of capital, and the demands for 
more elaborate facilities and luxurious 
service. 

Are any of these obstacles sufficient¬ 
ly important to delay such revision of 
rate schedules as will meet this 
anomalous situation of increasing 
gross earnings, but declining net 
earnings, and still more rapidly de¬ 
clining net corporate income after pay¬ 
ment of fixed charges ? 

The railway managers of the coun¬ 
try want to know where to improve. 
They welcome just criticism based on 
a real knowledge of all the actual 
facts. It is their purpose to profit by 
it. To serve the public adequately, on 
the other hand, is also their purpose, 
and it is their duty to seek diligently 
from the appropriate authorities the 
sanction and help necessary if the 
railway is to do what the people want 
and must have if the country is to 
grow. So it would seem as if it was 
to the interest of the people to be 
patient with a railway which has 
practically no control over the price of 
what it has to sell—transportation— 
and very little control over the price 
of labor needed to produce that trans¬ 
portation. 

New England is a great educational 
and financial force. She has sent her 
sons all over the country to help do 
the work needed. In the last edition 
of “Who’s Who in America” twenty 
per cent, of the names are those of 
men born in New England. Anything 
that affects adversely the credit and 


social welfare of New England will 
in turn affect the whole country. Her 
welfare and the welfare of her rail¬ 
ways are important to the entire 
country. These six New England 
States have one-fourteenth of the 
national population and have one- 
twelfth of the national wealth. They 
consume one-eighth of the materials 
of manufacture and they have one- 
sixth of the bank deposits. For the 
New England Lines, that I represent, 
I ask the patient good-will of her 
people and of the nation, while her 
peculiar and difficult transportation 
problems are being solved. (Great 
applause.) 

I don’t think I ever sat in a Board 
that felt so badly as the New Haven 
Board did yesterday when the figures 
forced them to make the decision that 
took away a dividend, coming at 
Christmas time, from thousands and 
thousands of people. (Applause.) 
But they had the courage to take that 
position because they felt in the long 
run it would be better for the proper¬ 
ty, better for New England, and better 
for the stockholders themselves. (A 
VOICE: Good, good!) 

The business men of the country 
who benefit from the accumulated 
savings of New England, from her 
large purchases from other parts of 
the country, from her great and con¬ 
tinuous contributions to the national 
welfare in sending out trained men 
and women, should at this time of 
storm and stress help the situation in 
every reasonable way. It is to your 
interest to do it and as patriotic 
citizens interested in the welfare of 
the whole country I ask you most 
earnestly to help. (Great outburst of 
applause and prolonged cheering, Mr. 
Elliott rising and bowing.) 


14 




HI56 74 577 










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